Mortgage

Hybrid appraisal waivers provide financial savings however delegating will be difficult

Hybrid appraisal waivers, which allow for the collection of supplemental property level data from a nontraditional third party, aren’t widely used yet; but they can offer a turnaround time within a day when they are, speakers at National Mortgage News’ Digital Mortgage Conference said this week.

The “property data reports” that government-related investor Freddie Mac began designating certain loans as eligible for through automated underwriting in July are “not heavily used yet” but show promise, said Brian Zitin, CEO of Reggora, in a panel on budgeting, staffing and fintech. 

The technology is one Freddie’s competitor, Fannie Mae, also has tested and used for contingencies, and it now is becoming more in demand given that fewer mortgages are eligible for traditional waivers in the current market. The shift to a more purchase-oriented mortgage market with high rates contributed to waiver eligibility declining, and in rolling out its property data report, Freddie noted that it’s been scaling it back for rate-and-term and cash-out refinances too.

PDRs are getting a push from at least one big player. Rocket Mortgage, a publicly traded large nonbank credited with starting the digital wave in housing finance, has been testing them, and a the company’s director of collateral policy and product development, speaking on a separate DigMo panel, said that the property reports are efficient.

“With hybrids and with inspection-based waivers…we, in general, can get those reports completed faster [than a traditional appraisal],” said Rachel Robinson, during an interview about secondary-market appraisal modernization at the conference.

Turnaround times on the PDRs Rocket has worked with to date have increasingly been within a day, according to Robinson. In comparison, turn times for more traditional valuations — depending on location and appraiser availability — usually take at least a couple of days, and can take a week or more. Inspection-based waivers also can cut costs associated with the process for consumers by one third compared to a traditional appraisal.

“Answers on the value, the condition, the entire collateral package…more and more, we’re starting to see those results in 24 hours,” Robinson said. “Being able to get somebody out to the property to collect the data and get it back in and reviewed is actually a relatively quick process.”

However, the process of determining who and how to delegate that collection of  information to was a challenge.

“There are multiple apps out there, technology that is available to meet the data standards that the GSEs set to collect the data, but it’s not just that, you need the humans to be able to do it,” Robinson said.

Several factors complicate the plan for outsourcing: the ability to accommodate the workflow involved, whether the people doing the work will favorably represent the company’s brand and whether consumers understand and trust the process.

“It takes education,” Robinson said, noting the sales force needed to be equipped to answer questions like, “Why isn’t it an appraiser that’s coming out to the property and why do we feel okay with that?”

Rocket has not fully rolled out PDRs on a regular basis but is working toward it, Robinson said.

“We’ve got to scale this so that we have the workflow and all of that running at a fast clip, but I don’t think that we are far away from being able to have this kind of value and certainty in 24 hours on a repeat basis,” she said.

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